Victory for Shell in $3bn Tax Battle

A long running battle with Indian tax authorities has ended in victory for Royal Dutch Shell following claims that shares allotted from the company’s Indian subsidiary to its parent, were under-priced.

The High Court of Bombay’s ruling in favour of the energy company in the $3bn case is a rare win for companies in India that have been at the centre of tax disputes. From an investment aspect, the recent tax claims that have been brought by revenue authorities against several multinationals are bad news; however “this positive outcome should provide a further boost to the Indian government’s initiatives to improve the country’s investment climate,” according to the Indian subsidiary.

The ruling mirrors Vodafone’s win last month in a case regarding transfer pricing. Shell’s case, also involving transfer pricing, was brought on the allegation that the company had made an inaccurate assessment of the amount it owed in relation to share transfers between 2008 and 2009, and were deemed by authorities to owe $2.9bn in tax.

International businesses in India have complained about the unpredictable and unfair manner in which the tax authorities operate, and so the positive effect of the decision is predicted to extend to more than two dozen other multinationals that are dealing with similar claims at present, including HSBC and AT&T.

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